How can pharma provide access to medicine in the world’s rising economies?
As our market access focus continues, Tara Prasad highlights the importance of global initiatives to help patients in the least developing countries gain access to medicine and discusses the role pharma plays in making this happen.
Driven by rapid growth and the demands of an expanding middle class, emerging economies that were previously characterized by low public expenditure on health and weak healthcare systems are now going through immense health reforms.
To give some notable examples, three of the largest emerging economies, Brazil, China and India, have put in place reforms with the objective of providing universal healthcare coverage. Meanwhile, Ghana has instituted a national health insurance system, which covers most of its population.
Spending on medicine in emerging markets is projected to nearly double by 2016, and developing countries are expected to significantly outstrip healthcare spending growth rates of developed countries. But while there are incentives to enter these markets, healthcare systems remain relatively nascent, presenting barriers both to the development of commercial markets and to ensuring access to medicine for the poor.
Yet even those without means represent a significant market, with healthcare spending for and on behalf of the poor around the world estimated to be $158.4 billion in local purchasing power parity terms, of which one-third is spent on pharmaceutical products.
“Spending on medicine in emerging markets is projected to nearly double by 2016…”
This existing market, and new opportunities that arise on the back of healthcare reforms and the increasing purchasing power of the middle class, are untapped and under-served. In large part, this is due to the diverse and often precarious nature of these markets and the lack of reliable channels for addressing them. While the opportunity is now becoming more evident, developing, producing and delivering medicines that are suitable for these emerging markets requires new incentives, new business models and new strategies.
Two billion people with no access to medicines
Concerted efforts by many different people and organizations, including the World Health Organization, non-governmental organizations, governments, public and private institutions and the pharmaceutical industry, to expand access beyond the developed economies, means that today five billion people have access to medicine. But that leaves approximately two billion people who do not, and globally, the impact of this lack of access is devastating. Around 85% of the world’s deaths occur in low and middle income-countries, with more than 29 million deaths every year due to non-communicable diseases such as diabetes, and 63% of deaths in Africa due to infectious diseases, including HIV / AIDS, malaria, tuberculosis and 17 neglected tropical diseases.
With adequate access to medicine many of these diseases are preventable or treatable. However, low and middle income countries not only need to have sufficient funds to buy medicines, they also need significant improvements in healthcare infrastructures, a higher awareness of diseases and a strong commercial incentive for providers and distributors to participate in improving provision.
Risks and opportunities
Bringing a medicine into a developing country where there is limited or no paying power is an immense challenge. For a pharmaceutical company, it is not business as usual. Market access in developing countries falls into the nexus between a company’s mainstream commercial strategy and its access to medicines initiatives. On both of these fronts, pharmaceutical companies face a lack of knowledge of local health systems, social conditions, disease burden, the economic environment, and regulatory frameworks, coupled with a shortage of data with which to assess these factors and determine how to price products. Overall, this may lead companies to conclude that developing countries present more of a risk than an opportunity.
“…today five billion people have access to medicine. But that leaves approximately two billion people who do not…”
The key to defusing this risk is to engage with local governments, regulators and stakeholders that share a similar view of the value of access to medicine. This is the starting point to understanding the needs of any new market and to tailoring existing products and business strategies to meet these requirements.
Companies can cater to local needs by, for example, providing heat-stable medicines for use in tropical climates, and paediatric formulations for children at high risk of severe illness. Access to medicine initiatives have also involved companies taking part in local partnerships, enhancing research, local manufacturing and distribution capabilities, and investing in training local workers with technical, practical and pharmacist skills. Some companies’ programmes have reached rural populations, enhancing general health infrastructure and services, although it should be noted the burden of financing and sustaining this is immense, for all players.
What this illustrates is that when companies take an active role in ensuring access to medicine for the poor, by supporting local healthcare market and healthcare system needs, they are also creating a platform from which to address the growing commercial markets in developing countries. But this in turn highlights the fact that any initiatives on access – be it in the course of building a commercial market or in providing access to the poor – must be sustained, must be aligned with national needs and must come with a long-term commitment to invest.
Given the pressure to cut prices that stems from growing generic competition and limited paying power, it can be a difficult balancing act for originator pharmaceutical companies to devise pricing strategies in which low prices drive high volume sales, increasing access whilst ensuring sufficient revenues.
“…devising such pricing structures requires data on patients’ ability to pay, which are unavailable in many of the least-developed countries.”
Price segmentation, in which products are priced based on affordability for different socio-economic groups, can provide a more targeted mechanism here. However, devising such pricing structures requires data on patients’ ability to pay, which are unavailable in many of the least-developed countries. This makes it difficult to guarantee appropriate segmentation of the market to ensure that lower priced products really reach target populations.
Despite these difficulties, and the risk that lower priced products will be diverted into more affluent markets, many companies apply segmented pricing in an effort to ensure products are priced equitably.
Creating a virtuous circle
There are huge variations in the quality of healthcare systems and in the ability to pay for medicines, both between different emerging economies and within individual countries that for the most part do not exist in developed countries. The pharmaceutical industry is a key actor in a global movement that is working to address these inequalities and to reduce the global disease burden.
In improving access to medicine for those who have no means of their own, companies are building relationships and acquiring knowledge and insights of local healthcare systems and the socioeconomic frameworks in which they sit. This provides companies with the opportunity to demonstrate social responsibility and also positions them to address commercial markets in developing countries, creating a virtuous circle that can provide feedback to further improve the targeting and sustainability of access programmes.
In short, a powerful synergy is emerging between access to medicine programmes and commercial strategies. This is an incentive to maintain this commitment – and to put the focus on the two billion people who have no access to medicine.
Access to Medicine Index 2012
IMS Institute for Healthcare Informatics, IMS Market Prognosis, May 2012
Pharma’s New Productivity Challenge: Perspectives from Emerging Markets (PharmaFutures)
WRI, IFC 2007 the next 4 billion
Bringing medicines to low-income markets, BMZ, January 2012
Pharma’s fight for profitability, 2013 Roland Berger Strategy Consultants
Africa, a ripe opportunity, IMS Health 2013
Declining Medicine Use and Costs: For Better or Worse? IMS Institute for Healthcare Informatics, May 2013
About the author:
Tara Prasad completed her B.A. from McGill University with a double major in Economics and International Development Studies and a minor in Management. She earned her M.Sc. in Development Studies from the London School of Economics, where she focused on Economic Development Policy and the use of econometrics to examine social and economic development trends.
After her master’s degree, Tara worked for a year at MSCI as a Research Analyst on the Access to Medicine Index 2012, engaging in the methodology refinement, data collection, analysis and ranking. She now works at the Access to Medicine Foundation, an independent not-for-profit organisation, as a Lead Researcher, engaging in research and methodology development for the next iteration of the Index (to be published in 2014).
The aim of the Access to Medicine Index (http://www.accesstomedicineindex.org) is to stimulate positive change by publicly encouraging pharmaceutical companies to step up their efforts to improve access to medicine worldwide.
Tara can be reached at firstname.lastname@example.org.
How can pharma access commercial markets in the world’s rising economies?